Case Analysis: Avon Products
Avon Products Inc. is one of the leading global beauty corporations with approximately $10 billion in total annual revenues. The company mainly relies on the direct selling approach to market its products. The company’s active sales personnel has more than 6 million people. Today, the products of Avon are available in more than 100 countries including skin care and household products. Avon products are widely recognized for their brand names including mark, Avon Color, and ANEW among others. The mission of the company is to provide innovative quality products to women at competitive prices. It also deals with a diverse range of products including jewelry, accessories, lingerie, and gifts. Most women prefer Avon due to its commitment to support the position of women in society. For instance, the company had participated in various social corporate responsibility programs including breast cancer and domestic violence protection. The company had donated more than $957 million to charity so far, thus becoming one of the largest supporters of women’s rights. The core business and strategic values of Avon Inc. include trust, respect, belief, humility, and integrity.
Current Strategy Analysis: Avon Products
The current strategy of Avon Company is the corporate level strategy, which emphasizes on cooperating with the other companies to promote work performance. The current strategy fits well to the general, industry, and competitor environments. It is able to focus on the strategic partnership with the other companies in the cosmetic industry. The current strategies explore the value chain strengths which involved expanding the supply capacity and networks of the company in the markets. The company’s international cooperation strategy has been crucial in improving the overall partnership with other companies. Avon Products Inc. uses an interactive and direct approach to communicate with customers, which helps them to obtain a better understanding of modern women.
The business strategy involves interacting with customers on a personal level. The personal level of interaction helps the company to gain a higher competitive advantage over its competitors. Affordable pricing is another strategic approach, which has been implemented by the company to improve its success in the current market (Hill, Gareth and Melissa 201). In the modern beauty industry, there are numerous companies offering the same products. Thus, the affordable pricing strategy helps Avon to gain a higher market share as compared to the other companies.
Situational analysis of Avon comprises of the effective assessment and evaluation of external and internal analysis components of the company.
The most influential general environment element is competition. Avon Products Inc. faces strong competition from the other cosmetics companies including Loreal, Lakme, and Oriflame. The external competition limits the ability of the company to grow and obtain new customers. Competition has a negative effect on the overall performance and progress of the company. Thus, the Avon Company should develop new approaches to overcome stiff competition. An optimal solution is the formation of alliances and strategic partnership with third-party suppliers.
In the beauty industry, companies are forced to enter into the third party supplier agreement, which helps in the overall supply chain process of the company. In spite of the third party supply force, Avon Products Inc. has neutral strength in the formation of a partnership with the third-party suppliers. The major weakness is the increased dependence on third-party suppliers (Hrebiniak 124). As discussed earlier, beauty companies mainly rely on a third party to supply their products. Such a situation places beauty firms in a difficult position in being able to supply their own products. In the future, Avon Products will develop a rebranding strategy useful in driving consumer demands. The strategy would also enable the company to enter into new and emerging markets across the world.
One of the main value chain areas of Avon Products Inc. is its differentiated business model, which assists in supporting the emerging layer of business performance and growth. The company also enjoys steady revenue expansion and growth unlike its competitors including Loreal and Oriflame (Liu and Wai 83). The continuous growth of its revenues provides a strong position to enhance its competitiveness and value chain capability.
Over the last three years, Avon Products Inc. has had a strong current ratio of more than 1.00. The current ratio implies that the company will be able to pay its current obligations without any delays. The current ratio has also been improving from 2012 to 2014.
In spite of the financial concerns facing the company, Avon Products remains financially viable and cannot operate without becoming bankrupt. Non-financial aspects of Avon Products predetermine that the company provides support sales activities. Compared to its competitors, Avon is able to deliver effective support sales activities, which aim at better understanding the firm’s customers, which is critical in ensuring that the beauty products produced by Avon meet the needs and specifications of customers in different markets.
SWOT Analysis of Avon Products
SWOT analysis helps in providing a better understanding of internal and external factors affecting the success of Avon Products Inc.
· Constant revenue growth;
· Strong support sales activities through a better understanding of the customers’ needs;
· Differentiated business model.
· Reduced north American business operations;
· Reduced market share.
· Restructuring programs to enhance the company’s effectiveness;
· New and emerging markets;
· Rebranding strategy to enhance consumer demands.
· Strong competition in the industry;
· Competitive advertising and distribution networks;
· Heavily dependence on third party suppliers.
Avon Products Inc. enjoys an oligopoly position in the global market due to the key competitors who influence each other’s strategies and decisions. The top competitors of Avon Products Inc. are:
· Mary Kay
In the strategy formulation phase, Avon Products Inc. will establish three strategies under the corporate level strategy, business-level strategy, and the growth strategy. First, Avon will enhance the effective allocation of resources to different business activities across the portfolio. The allocation of resources will support the effective implementation of key responsibilities useful in the development of unique and custom-tailored products. The stiff competition in the beauty industry recommends the company to allocate its resources into the most productive and competitive products. Thus, the strategy will be important in improving the overall competitiveness of the company’s beauty products.
The second strategy, which will be adopted by the company, is to establish investment priorities and direct additional corporate resources towards the most attractive business segments. This is a business-level strategy aimed at investing more resources to the most productive business segments (Hrebiniak 125). With this strategy, Avon Products Inc. will be able to improve its competitive edge and performance to compete with the key competitors in the market. Some of the investment priorities include supplying additional financial and managerial resources to specific business units.
Finally, it is recommendable for Avon to enhance the diversification of marketing and advertising plans. Diversification of efforts is a crucial growth strategy, which assists in improving the current market share of the company. Today, Avon Products has been threatened by reducing the market share in North America in comparison with the bigger brands. The marketing and advertising initiatives at the company will be diversified to various local and regional markets. The investment will be critical in supporting the future growth and progress of the company.
Avon Products Inc. uses the 7S model to implement the selected strategies. In terms of implementation of the diversification strategy of marketing and advertising initiatives, the 7S model provides the key areas, which could be interconnected to promote success. The critical area of the 7S model is the structure, and thus it guides the company in developing a supportive organizational structure to provide the success of the diversification of marketing and advertising initiative strategy (Merchant 165). The structure element will be important in the success and effective implementation of the selected diversification strategy. For instance, it will integrate the goals and objectives of the strategy to the overall organizational mission and vision.
However, it is important to fix all the seven areas of the model within the organization. They include structure, skills, strategy, style, systems, shared values, and staff. It will take six months for the company to align all seven areas of the model to the organization. Within the timeline, the company will ensure that the recommended diversification strategy properly aligns to the overall goals of Avon Products Inc. to enhance its competitiveness within the industry.
In conclusion, Avon Products Inc. needs to adopt an effective allocation of resources, which support the effective implementation of the key responsibilities useful in the development of unique and customer-tailored products. Most importantly, it is clear that the current strategies explore the value chain strengths, which involved expanding the supply capacity and networks of the company in the markets. The company’s international cooperate strategy has been crucial in improving the overall cooperation with external companies in the industry. Finally, it is necessary to improve the diversification strategy in order to establish a corporate level strategy, business-level strategy, and the growth strategy.